RCR to Acquire Electrical Contracting Business Positron for $43.7 million

Latest news from Rcr Tomlinson

27-Sep-2007

Positron Group Acquisition

Leading multi-disciplinary engineering company RCR Tomlinson (RCR) is pleased to announce that is has reached agreement to acquire the Positron Group Pty Ltd (Positron).

Highlights
* Positron was established in 1987 and provides electrical services, which includes construction, maintenance, manufacture and overhaul of substations and switchboards to customers in the Mining, Resource and Infrastructure sectors across Australia * Positron has facilities in Perth, Kalgoorlie, Pinjarra, Sydney, Lithgow and Mackay
* The acquisition of Positron provides RCR with the opportunity to significantly increase RCR’s service offering to increase the organic growth rate of RCR’s work portfolio nationwide, and in particular to the Bowen Basin coal industry
* The acquisition is based upon an approximate 4.0 times EBIT multiple
* The EBIT of Positron for FY2008 is anticipated to be $10.9 million
* The purchase price of Positron is $43.7 million, with purchase consideration of A$21.7 million cash funded from RCR’s internal resources and 10 million shares at $2.20 per share for a total value at $A43.7 million. The acquisition includes $10 million of net assets
* The acquisition adds significantly to RCR’s earnings
* The acquisition is strongly EPS positive
* The acquisition will see the establishment of a fourth RCR business unit – RCR Electrical Services. Positron’s principal, Mr Jeff Hogan, will head the new business unit

Acquisition Overview
Positron provides principally electrical contracting services to customers nationwide. Positron has previously worked on contracts in partnership with RCR and provides services to a similar though complementary customer base of clients in Australia’s resources sector and to the Infrastructure Industry sector in NSW. The acquisition of Positron also includes its four wholly owned subsidiaries.

A Positron subsidiary Tripower Pty Ltd (Mackay Fluid Power and Mackay Air and Fluid Power), located in Mackay, Queensland provides Hydraulic and Pneumatic Services to Industry and complements the RCR Bunbury based Hydraulics business with the addition of Hydraulic Design personnel. These complementary skills will allow for an increase in the components supplied by RCR for the existing range of products currently offered to industry.

A Positron subsidiary Spliceline, based in Pinjarra, Western Australia, provides rubber lining services to local industry and complements our existing rubber lining divisions based in Bunbury and Geraldton.

The principals of Positron will be employed by RCR to grow the Company’s presence in all areas of Construction and Maintenance. The principal of Positron will head the new Business unit as the Executive General Manager of RCR Positron Electrical Services.

Terms of the acquisition
The final consideration paid by RCR will be calculated on a sliding scale, with the final amount calculated by reference to Positron’s EBIT during the 12 months to 30th June, 2008.
* This minimum purchase price represents a multiple of approximately 4.0 times EBIT. For EBIT between $10 million and $10.9 million, cash will be allotted on a sliding scale.
* The maximum purchase price payable is A$43.7 million, of which $21.7 million will be paid in cash and 10 million RCR ordinary fully paid shares at $2.20 per RCR share. Eight and half million of the shares will be held in escrow for 12 months.

Settlement is anticipated during September with the acquisition to be effective from 1st July 2007.

The cash component of the acquisition of Positron will be funded utilising RCR’s internal financial resources. Financial Effect of the Acquisition The acquisition of Positron will add significantly to the revenue and EBIT of RCR, with EBIT of $10.9 million expected in FY2008. The acquisition of Positron will be strongly earnings per share positive for RCR from the acquisition date.

The cash component of the consideration will be funded from internal resources. The gearing level of RCR will increase from approximately 13% to 25% on completion of the acquisition.

New business unit – RCR Electrical Services
The acquisition of Positron will see the establishment of a new business unit, RCR Positron Electrical Services, which will compliment RCR’s other operations; RCR Construction and Maintenance, RCR Engineering and RCR Energy Systems and Industrial Services.

CEO Comment
RCR Tomlinson Chief Executive Officer John Noordhoek said “the acquisition of Positron will be a significant transaction for RCR Tomlinson that is expected to boost Company revenue by up to 25% a year and will further cement RCR’s position as one of Australia’s top tier engineering services firms.”

“Positron has significant synergies with RCR’s existing business units and will further strengthen our capabilities to deliver savings and improve services at a national level and return outstanding value to our shareholders”, Mr Noordhoek said.

“15% of the Positron Group turnover is derived from the Infrastructure sector in NSW and this represents a new major market opportunity for the other business units of RCR.”

“This acquisition also fits within our existing growth strategy and complements both our existing business units and the recent acquisitions made by RCR, complimenting RCR’s long-term strategy of looking for acquisitions that can add value to the RCR business immediately and increase RCR’s service offering on a national level.”

“The acquisition of Positron represents a major growth in the reach and type of services able to be offered by our company on a national level – RCR now has more than 2,300 personnel working in 20 locations in Australia and New Zealand.”